Ian Shott, Chair of the Royal Academy of Engineering Enterprise Committee, argues that addressing the business skills gap is vital for driving engineering enterprise.
A good idea is very different from an innovation, and an innovation is very different from a successful venture. This is particularly the case when it comes to engineering businesses born out of academic research. While they clearly have innovation at their heart, their founders may not be experienced leaders.
Leadership and business acumen are crucial components of a successful venture, yet recent research shows us that many entrepreneurs lack these essential skills. For example, the Annual ScaleUp Review from the ScaleUp Institute found that a lack of leadership capacity is holding back UK startup companies. And, in some of our own research conducted earlier this year, we found that 27% of engineers said that concerns about their lack of core business skills were preventing them from starting a business.
The Royal Academy of Engineering’s Enterprise Hub has long recognised that good business skills such as leadership are just as important as access to finance for growing successful engineering and technology companies. We have found that engineers equipped with essential business skills, as well as ambition, are not only better at navigating new markets, but are also more likely to capitalise on growth opportunities.
That’s why we were particularly pleased to see a focus on developing these skills in the Chancellor’s Autumn Budget. The government’s Industrial Strategy also recognises that business and leadership skills are key to driving our entrepreneurial culture, and the Chancellor’s clear support for innovative ventures should be welcomed by all those wishing to see a continued growth in engineering enterprise in the UK.
The promised investment of £25 million to boost the Knowledge Transfer Partnerships scheme will help translate innovative research insights into crucial business growth. The creation of a Small Business Leadership Programme recognises the importance of teaching leadership.
The Knowledge Transfer Partnerships scheme is expected to recruit an additional 200 graduates and academics into firms with relevant skills gaps. It has an excellent track record and I have seen companies completely change their strategies for the better as a result. Such activities are essential to help leverage R&D funding from businesses to reach the government’s target of 2.4% of GDP being spent on R&D in the UK. The Small Business Leadership Programme will train an estimated 10,000 people per year by 2025. These are exactly the type of investments we need to help address the skills gap and enable more businesses to succeed.
As a nation, our research is world class, and a great deal of support is required if we are to ensure we turn these ideas into innovations, and the resulting innovations into long-term business ventures.
Since 2013 the Enterprise Hub has been working hard to catalyse a culture of enterprise by bringing together Britain’s brightest and best engineering entrepreneurs.
Through training opportunities focusing on sales, marketing, HR and regulation, and supported by an extensive network including our Academy Fellows, the Enterprise Hub ensures that entrepreneurs emerge with the necessary skills, confidence and contacts to successfully scale up their businesses.
To date the Enterprise Hub has supported over 100 entrepreneurs through schemes such as the SME Leaders programme, which develops the leadership skills of business leaders in the UK’s most promising high-growth engineering SMEs.
Twice a year, successful applicants to the programme are given funding of up to £10,000 towards the cost of a training course they have chosen to develop their skills in areas such as managing people, launching a new product, or entering a new market.
As well as providing crucial coaching and mentoring, the Enterprise Hub also plays an important role in connecting entrepreneurs to investors; to date access to our network has helped our Enterprise Fellows alone raise over £70 million in follow-on funding.
Appropriate and well-timed funding is equally important for any ventures looking to scale up. A survey by Smith and Williamson’s revealed that almost half of scaleups were expecting to take on more investment within the next year, compared to just 18% of non-scaleups saying the same.
In 2017 the Chancellor announced a plan to unlock £20 billion of finance for innovative high-growth firms through pension investments in patient capital, and several of the largest pension providers in the UK have committed investment. Patient capital provides the vital access to long-term finance that is particularly important to engineering firms, giving innovators the time to develop and grow their businesses over a much longer period of time than much other investment.
The Chancellor’s intention to continue exploring the use of pension funds for investment is positive and will undoubtedly play a vital role in enabling mid-sized businesses to grow sustainably, supported by this longer-term financing.
Five years after the Enterprise Hub was created, real progress has been made, with over 70 companies formed and 364 jobs created as result of the Hub’s involvement. We must continue to build on this achievement.
The UK is one of the best places in the world to start and grow a business, and this was reinforced by the Chancellor in his Budget. We must look beyond Brexit and support innovative ventures that have long-term potential. To do so we must continue to see clear commitments from our government and institutions to addressing the business skills gap and improving access to carefully designed and targeted funding for high-potential companies to achieve ambitious growth.